Learnings from Silicon Valley to nurture a model out of Africa

Solomon the sage has it to say that every enterprise is built by wise planning, just as the engineers that began silicon valley were not after personal gain, as they were more concerned with making things possible that had never been realized before. This included big goals like space travel, among other inventive works, which won the hearts of government (who gave grants) and venture capital companies that have continued to fund good enterprise to date.

One name that comes to mind is Arthur Rock, who started his career in 1951 as a securities analyst in New York City. He was one of the early believers and investors in Intel, Apple, and Scientific Data Systems. He joined the corporate finance department of Hayden, Stone & Company, where he paid a lot of attention to raising money for small-sized high-technology companies. In 1961, he moved to California along with Thomas J. Davis Jr., where they started the San Francisco venture capital company Davis & Rock. Rock was a member of Apple’s early board about the time Steve Jobs was removed in the 1985s.  In 2003 alone, he donated $25 million to the Harvard Business School to institute the Arthur Rock Center for Entrepreneurship.

The foregoing reveals people with passion and experience who were willing to make sacrifices to create lasting legacies in institutions and the corporate space made possible at the Silicon Valley. It is evident that knowledge is at the center of all truly lasting achievements and the Valley is not an exception. Today, Silicon Valley is at a point where it is considered as a rich ecosystem where everyone that has an idea can show up because, in that space, people could literally sit in a coffee shop and form a business team, raise some money, and start their venture almost at the snap of a finger. Some accelerators, like Y Combinator (with 4,294 investments done) and Sequoia Capital (with 1,638 investments), and head offices there, make it really easy for startups and growth-stage companies to do a lot of good for humanity. New technologies like the Amazon Web Services (cloud-based infrastructure) and software development tools and frameworks have even further improved the ease of doing business with a good number of tech startups and scale-ups leveraging on the same. So much can be gleaned from the success stories out of Silicon Valley, most of which are situated around shared knowledge and resources, willingness to make sacrifices, a culture that wants to contribute, and many other virtues.

I strongly believe the time is ripe for countries out of Africa to deliberately create leverage and sustain the same to drive the momentum that births the desired narratives out of the African space. Africa has a population of over 1.3 billion (2020) people, a total land area of about 11,724,000 square miles (30.365million square km), that could easily be juxtaposed with the United States of America with a population of 329.5 million (2020) and one that spans 3.8 million square miles (9.834 million square km) – making it the third-largest country in the world. The numbers show that Africa (a continent viewed as a country) is 4 times larger than the US in people population and about thrice in terms of land coverage area, meaning that Africa has the potential to replicate 4 times of what America has demonstrated to the world.

With regard to productivity, the United States alone does about a quarter (24.67%) of the entire world’s GDP, and this is valued at $20.89 trillion (larger than what 168 countries combined have done – 16.04%). This means Africa has humongous potential by our estimation towing similar paths (bearing in mind the over 1.3 billion population) while building on a democratized consumer credit system.

Consumption (also known as demand) is at the foundation of the drive that birthed the huge US economy (and such magnanimity in demand is at the base of all great enterprises). From the 1920s through the 1950s, the modern consumer credit system was created. These decades saw the invention of installment credit, long-term mortgages, and revolving credit. However, the basis of the US modern consumer credit landscape was formed. This spanned rent-to-own home solutions and touched on all facets of American life. What if entrepreneurs and policymakers worked in synergy to make this possible for Africans? To let people buy on credit and live the life of their dreams could completely transform Africa as we know it today. The amount of disposable income and potential buying power of the African consumer (with democratized debt) just jumps to astronomical levels making it possible for more companies and entrepreneurs to create top range products and services because the demand side of the moving equilibrium is sorted out.

It is important to note that, Nigeria alone has over 17 million housing deficit; and if we imagine half of that population (8.5 million people) turned into homeowners overnight with funding leverage for their homes payable over a 5, 10, or 15-year period of say 300 USD monthly (now that’s $2.55 billion on the table monthly for smart investment money already collateralized). What a boom that will cause on the Nigerian GDP if we went full swing on the entire need-based 17m (that’s some whopping 5.1 billion USD on the table minimum for grab monthly based on our estimation – less than a tenth out of a population of over 206.1m). All of these are money created from collateralized debt. Considering more areas of human needs around Maslow’s hierarchy, that make for a better life and truly dignifying humanity, what could happen on the demand-side to the Nigerian bottom line, and by extension the African space?

Lest we forget, Silicon Valley was people-built and venture-nurtured, and some of the contributors to business development startups in that space are:

1. Bessemer Venture Partners: They invest in consumer, enterprise, healthcare, SaaS, and E-Commerce ventures. They have raised a total of $9.5 billion across 11 funds, their latest being Bessemer Venture Partners India Fund. This fund was announced on Nov 29, 2021, and raised a total of $220 million. The company commences funding from seed stage to series A investments and stays with the funded companies at every stage of their growth. They have made 1,214 investments, and the most recent investment was on Feb 17, 2022, when Arcion (through a convertible note funding type) raised $13 million. With an investment range of $4m to $15m, some companies they have invested in at the early stage include Pinterest, Skype, Twitch, Twilio, Yelp, LinkedIn, Shopify, Wix, and Peris

2. TDK Ventures: The company works with tech-related businesses, and is actively searching for solutions to difficult problems, while offering the startup phase funding in wellbeing tech, mechanical technology, and augmented reality. They have raised a total of $200 million across 2 funds, their latest being TDK Ventures Fund II. This fund was announced on Apr 12, 2021, and raised a total of $150 million. With roots as far back as 1935, TDK Ventures also invests in equipment arrangements like dielectrics, magnetics, and semiconductors, among others. With a typical range from $250,000 to $5 million at first, they have done 28 investments, and the most recent investment was on Feb 9, 2022, when Verdagy raised $25 million.

3. Pegasus Tech Ventures: They offer venture capital to technology startups across the globe, and specialize in helping to achieve global expansion. The VC company offers a unique venture Capital-as-a-Service model for large, global corporations that want to work with smart technology startups. They have raised a total of $751.8 million across 16 funds, and the latest is Corporate Venture Capital Fund. This fund was announced on Mar 9, 2021, and raised a total of $50 million. With funding in the range of $100k to $1m, they have made 229 investments, and the most recent investment was on Jan 31, 2022, when MedHyve raised $407.5k.

Notice that VC firms also raise money just like other entrepreneurs and governments do and that while each wants to multiply wealth while making life better, there are different funding types as well as investor preferences. This is why it is pertinent to invest in the headfirst as a serious-minded entrepreneur who is truly passionate about creating a change in our world.

Worthy of mention before round-off, is Flutterwave’s recent raise of 250 million USD (to make them the largest financial institution in Nigeria valued at over $3 billion) from B Capital Group (with 136 total investments and latest on February 16, 2022 – Flutterwave), who on Apr 1, 2021, announced a B Capital Group – New Fund and raised a total of $415 million. The financial space is an interesting one and playing in the same requires determination, tact as well as sound know-how to keep the currencies flowing. I will close with Julia Cameron, who says that What we really want to do is what we are really meant to do. When we do what we are meant to do, money comes to us, doors open for us, we feel useful, and the work we do feels like play to us.

The Future of Money is Value Creation!  

I am open to conversations that further on the foregoing and thank you for your investment in time. Yours in tech, Olufemi Ariyo. Email: [email protected]